KPMG experts discuss SVAT abolition and road ahead

SRI Lanka’s tax framework is undergoing a pivotal transformation with the abolition of the Simplified Value Added Tax (SVAT) scheme, effective 1 October 2025.

- 

This transition, announced by the Inland Revenue Department (IRD), will replace SVAT with a risk-based VAT refund mechanism under the Value Added Tax Act, No. 14 of 2002, as amended.

At a recent webinar titled “From Theory to Practice - Your Roadmap to SVAT Abolition & Beyond”, hosted by KPMG in Sri Lanka, leading tax professionals unpacked the implications of this shift for exporters, indirect exporters, and SMEs. The session featured insights from Principal — Head of Tax Suresh R.I. Perera, Principal — Tax and Regulatory Rifka Ziyard, and Associate Director — Tax and Regulatory Radhini Thomas.

Abolition of SVAT: A structural reform

Introduced in 2011, SVAT was designed to ease VAT refund delays and reduce fraud by allowing exporters and identified suppliers to transact using credit vouchers. Contrary to popular belief, the abolition of SVAT is not an IMF recommendation. As clarified during the session, the IMF report indicates that this was a request initiated by the Sri Lankan Government.

Suresh Perera cautioned: “The refund-based VAT scheme that replaces SVAT could severely impact Sri Lankan businesses and the broader economy if not implemented efficiently. While it represents a step toward modernising our VAT regime, failure due to administrative inefficiencies or taxpayer unawareness could take us back to the dark ages.”